LOS ANGELES -- After more than a year of negotiation, Food 4 Less Supermarkets, La Habra, Calif., said earlier this month it would join Ralphs Grocery Co., Compton, Calif., in a management-led deal valued at $1.5 billion.
The combination of the two retailers will create a new market-share leader in southern California, with the new company gaining an estimated 30% market share and an estimated sales volume of $5.5 billion.
Vons Cos., Arcadia, Calif., is the current leader, with an estimated 25% market share. Its 345 stores have annual sales of $5.1 billion.
Terms of the much anticipated deal call for Yucaipa Cos. here, parent of Food 4 Less, to acquire Ralphs' stock.
Yucaipa Cos. will pay Ralphs shareholders $525 million and assume $980 million of Ralphs debt. With that amount, plus Food 4 Less, valued at $1 billion, the combined companies are valued at $2.5 billion. A portion of the merged companies will be owned by management of each firm.
The deal is subject to approvals but is expected to close next month.
The new entity, to be called Ralphs Grocery Co., will operate an estimated 280 conventional stores under the Ralphs name and about 80 warehouse stores under the Food 4 Less name, all in an area of southern California stretching from Ventura County south to the Mexican border.
